Tax debt can be a source of severe anxiety for many people. You’ve worked diligently throughout the year, making ends meet and striving to save for your future, only to discover you owe the Internal Revenue Service (IRS) more than you can currently pay. As disheartening as it may be, it’s vital to remember that there are methods and strategies available to help you manage this situation effectively.
This blog post will walk you through five practical tips for dealing with tax debt, enabling you to set things right with the IRS.
Take Advantage of the IRS Fresh Start Program
Your first step towards alleviating your tax debt stress should be exploring the Fresh Start Program IRS. Initiated in 2011, this program is designed to make it easier for taxpayers to pay back taxes and avoid lien on their property.
The Fresh Start initiative has expanded to include flexible terms for paying off tax debts, offering extended installment agreements, and allowing taxpayers to pay a reduced lump sum under certain conditions. By exploring this program, you could potentially avoid the penalties associated with delinquent tax payments, giving you a ‘fresh start’ towards a debt-free future.
Create a Payment Plan
Creating a payment plan is a practical method for dealing with tax debt. An installment agreement allows you to make monthly payments toward your debt, making it more manageable. This option is particularly useful for those who cannot pay their tax debt in one lump sum.
By contacting the IRS and setting up a payment plan, you demonstrate good faith in your intention to pay your debt. This step can help avoid collection enforcement action, such as levies and liens.
Apply for an Offer in Compromise
An Offer in Compromise (OIC) is another option that allows you to settle your tax debt for less than the full amount you owe. The IRS considers your ability to pay, income, expenses, and asset equity when evaluating your OIC application.
It’s important to note that not everyone qualifies for an OIC, so consult a tax professional before pursuing this option. However, if approved, it can significantly reduce your tax burden.
Seek Professional Assistance
Sometimes, the tax debt can become complicated, especially when dealing with large amounts of back taxes from previous years. In such situations, it’s advisable to seek the help of a tax professional. Tax attorneys, Certified Public Accountants (CPAs), and Enrolled Agents (EAs) have the expertise to navigate complex tax situations and negotiate with the IRS on your behalf.
They can provide guidance, recommend the best course of action, and help you understand your rights as a taxpayer.
Understand Your Rights as a Taxpayer
Finally, it’s essential to understand your rights as a taxpayer. The IRS follows a Taxpayer Bill of Rights, which includes ten fundamental rights. Some key rights include the right to be informed, the right to pay no more than the correct amount of tax, the right to challenge the IRS’s position, and the right to privacy.
Familiarizing yourself with these rights can give you the confidence to handle discussions and negotiations with the IRS more effectively.
Facing tax debt can undoubtedly be daunting, but it’s important to remember that you are not alone in this struggle. Millions of Americans find themselves in similar situations each year, and there are a multitude of resources and options at your disposal to alleviate your tax burden.
Whether it’s the Fresh Start program, creating a payment plan, applying for an Offer in Compromise, seeking professional help, or simply understanding your rights – these tips will help you navigate your path to a resolution.